13/10/2023
US dollar update
USD dollar Summary
On Thursday, the US Bureau of Labor Statistics released its latest report indicating that the overall US Consumer Price Index increased by 0.4% in September. The annual inflation rate remained stable at 3.7%, contrary to expectations of a slight decrease to 3.6%. The Core CPI, which excludes the impact of volatile food and energy prices, aligned with projections and saw a decline to a 4.1% year-over-year rate in September. The US Dollar made a significant upward surge, recovering from several days of losses, although it remained below its recent peak for the period. The US Dollar index saw a substantial increase, exceeding 107 which was its highest price of the last 11 months. The current price is at 106.26 after a mild correction during the last hours.
Market observers are carefully examining the potential future actions of the Federal Reserve. While the most likely scenario anticipates that interest rates will remain unchanged until 2024, any unexpected positive developments in forthcoming CPI and employment reports could shift the balance towards the possibility of a rate increase as early as December. Despite the drop in yields during the last few days, there is significant uncertainty surrounding the Federal Reserve’s monetary policy direction. While some policymakers believe that interest rates have been raised adequately to moderate economic activity and curb inflation, others are adopting a more prudent stance and are looking for additional data on inflation patterns.
Market Views & Opinions
According to Scotiabank, “Softer US yields, as the US10YY edges back from the 4.70% area, and slightly narrower spreads may limit pressure on the EUR in the near term but the EUR’s overall yield disadvantage will remain a restraint on gains for now.” and for the short-term view on EURUSD they mention that “The EUR’s failure to push on through the low 1.06s area with any real conviction this week suggests the daily bear trend remains intact and may set spot on course for a retest of the mid-1.04 zone, or lower.”
Danske Bank, in their recent report, highlighted the market’s reaction to an increased probability of another Federal Reserve rate hike, now standing at around 40%. The report emphasized the importance of scrutinizing inflation details, particularly a surprising rise in the housing component after months of decline. They noted that while this inflation spike may not be persistent, the underlying measures of inflation, which the Federal Reserve usually references, have aligned with expectations. Danske Bank maintains its position that the US has already reached its peak in terms of policy rates.
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The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
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